UNDERSTANDING ENTREPRENEURSHIP AND THE CHALLENGES OF SMALL ENTERPRISE MANAGEMENT IN MOPANI: 2003-2008. Aaron Ramodumo, South Africa (Limpopo Province- Giyani)

Abstract The public reforms that began immediately after 1990 in South Africa had laid foundation for an increased number of small businesses enterprises. With millions of South Africans unemployed, it became essential that every opportunity for job creation and the generation of sustainable jobs was natured. However, Mopani small business growth and development has remained slow and suspect. This is becoming a threat that leads the country teetering on the brink of becoming a net importer of food. The research on Understanding Entrepreneurship and the Challenges of Small Enterprise Management in Mopani: 2003-2008 comes at an important time of need to reflect on the success, challenges, growth and sustainability of small enterprises in Mopani as case study. The study employed the qualitative study to understand how entrepreneurs conduct their businesses. A multiple case study method was undertaken with 30 entrepreneurs to pursue this research in the Mopani District Municipality of Limpopo Province. The study revealed that the entrepreneurial practices and procedures of running small agricultural enterprises were multidimensional and diverse. The research concludes that business success is a consequence of embracing a mix of strategies, which may be both formal and informal. Given the challenges that agricultural small enterprises experienced, government and policy makers need to consider poverty reduction strategies that would ensure sustainable agricultural small enterprises.

Key words: entrepreneurship, challenges, small enterprises, management, development

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INTRODUCTION AND BACKGROUND Small enterprises have become the backbone of many economies around the globe and the importance of small and medium-sized enterprises (SMEs) to economies around the world had begun to be beyond dispute. Throughout the world, small enterprises are hailed as drivers of economic growth and development, a seedbed for future development and that they provide employment and to a great extent, promote the standards of living of communities. Survey has shown that, on a global scale, more than 90 % of all businesses are SMEs (Massey, 2005). In most developing countries in the Southern Africa, small enterprises contribute significantly to job creation and to the overall gross domestic product (GDP) of their countries (Herrington, 2011), and employs 22 % on average of the adult population in five Southern African countries, compared with only 15 % of the adult population employed in the formal sector (Brink, Ligthelm and Cant, 2001). Clearly, owning and running a small enterprise in South Africa has become a dream to which people aspire. Many revere and envy the brave and successful entrepreneurs who have taken the leap into small enterprise and enjoy independence and the fruits of a self-made fortune. However, the idyllic picture only holds true for two of every ten enterprises.

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In South Africa, the public reforms that began immediately after 1990 had laid foundation for an increased number of small businesses enterprises. The South African government had identified growth and economic empowerment as key to the sustainable growth of the economy. With millions of South Africans unemployed, it became essential that every opportunity for job creation and the generation of sustainable jobs is natured. More income generating programmes and projects such as small enterprises begun as a way to address widespread poverty, unemployment as small enterprise were perceived to have an important role in job creation and income generation.

With the help from various organisations and state organs, some new and previously disadvantaged business individuals began to test business opportunities and profit. A whole range of self-employed small business (agricultural small enterprises) began and gained speed as a consequence of the reforms and support that took place with the dawn of democracy for the first time in decades. Government’s idea was to encourage people doing it for one-selves to reduce poverty and create jobs for South Africans. This further contributed to a growth in the number of self-employed individuals and an increasing recognition of importance of small enterprises in the South African economy.

However, the Mopani small business growth and development has remained slow and suspect, and has become a threat that is leading the area teetering on the brink of becoming a net importer of basic food. Simply put, there are less successful small and medium enterprises in Mopani, a clear indication that such revered creators of wealth are not escapists of poverty. Despite the sector’s contribution to Gross Domestic Product (GDP) and employment in the locale, the rate of business failure has shown an increased in Mopani. In this area, small business growth and development has remained slow and suspect. For every ten new small enterprise ventures in Mopani, seven survive their first year, three will still be going after three years, and only two remain after five years (Klein, 2002). Most of these small enterprises are often plagued by challenges that often lead to business collapse. In most cases, the collapse is attributed to venturing into small enterprises without prior knowledge of the demands of an enterprise and 3

how business has to be conducted, or venturing into small business not out of perceived opportunity, but out of an opportunity made available to start a new business. Most importantly, the circumstance under which small enterprises were conceived has had an effect on the likelihood of its survival.

Despite the increased attention paid to accelerated small business development, there is much that is unknown about processes and practices in conducting successful small business. Little is known about the practices, procedures and context within which individuals who own and manage such businesses operate. The research on understanding entrepreneurship and the challenges of small enterprise management, seeks to understand and identify practices and patterns of successful agricultural entrepreneurs in Mopani District Municipality of Limpopo Province. In a nutshell, the researcher seeks to understand how successful small enterprise managers run their businesses (understanding the business of doing business). The researcher aims to identify patterns in successful small enterprise agricultural business so as to inform an understanding of the success and failure variables that impact on entrepreneurs.

SMALL ENTERPRISE DEVELOPMENT IN MOPANI

The research study takes place within Mopani district municipality, a rural municipality and a home to 1, 2 million people of which 77% live below poverty line (Mopani District Municipality Revised Integrated Development Plan, 2007). Mopani (figure 1) is a predominantly agricultural and tourism district municipality in the North East of Limpopo Province with abundant land for farming opportunities in its five local municipalities. The district municipality borders one of the world’s premier wildlife parks, the renowned Kruger National Park in the east.

Figure1. Map of the five district municipalities in Mopani

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Source: http://demo.demarcation.org.za.info

Mopani district is a rural municipality mainly characterized by rural conditions with high unemployment, low levels of economic activity, extreme poverty, service delivery challenges and capacity constraints. As a result of these conditions, many people in Mopani have become entrepreneurs, with others becoming successful and others not. In the small town and network points, hawkers ply their trade in vegetables, thanks to successful entrepreneurs from whom hawkers stock. Faced with prohibitive transportation costs to reach Gauteng markets and with no formal fresh produce market in Mopani, these entrepreneurs and emergent farmers rely mainly on local supermarkets and informal traders to sell their produce. Other potential customers to these entrepreneurs are established fruit and vegetable traders, general dealers, grocers, supermarkets, caterers and restaurants. Primary agricultural activities in the area include small-

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scale farming, livestock farming, poultry, beef and goats. Furthermore, the area is known for the production of citrus, tomatoes and other subtropical fruits and vegetables.

Mopani has 60, 4% unemployment rate, low levels of economic activity, and extreme conditions of abject poverty. Almost 80% of people in Mopani live in rural villages and the majority struggle to survive. About 39 % of the working population is farm workers (Mopani District Municipality Integrated Development Plan, 2007). Most people in the district rely heavily on government social transfers for their livelihoods and any other assistance that either comes in the form of grants to encourage the exploitation of opportunities, creation and development of small enterprises, or money from relatives working in other major South African towns.

The area is good is an important agricultural are. The soil is good for farming and is productive. The district and local municipality, together with private organizations such as commercial banks had provided grants to individuals and organized groups of people (mostly poor women) to start some business. The aim of the municipality though, was to assist some ailing enterprises and to create conditions which would allow small enterprises contribute to small scale employment generation and in profit making. In 2003, a total of 105 small scale farmers received funding as assistance to either improve their ailing conditions or kick them into entrepreneurial action. The money came handy from those that had already started.

Furthermore, the municipalities established links with department of agriculture to provide regular assistance that the farmers needed. The initiative by the Municipality was not only aimed at encouraging small agricultural enterprises, but improving the quality of people’s lives and creating better lives for entrepreneurs and others. Most of the businesses that received financial support from the district municipality have had some potential challenges that led to their demise. In some places, and particularly in Mopani, only few small enterprises still remained operating.

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The problem for Mopani district has however remained the development of successful and sustainable small enterprise agricultural sector that addresses the high levels of poverty and unemployment, thereby creating profit and stimulating the local economy. Most of the established farming businesses, which include amongst others, fruit and vegetable producers, have collapsed. There are few successful agricultural small enterprises amid the increasing numbers of entrepreneurs who are falling by the wayside of small enterprise development. This has become a worrying phenomenon considering the amount pumped into small enterprises to jerk them up. On the basis of the above, it is therefore required to identify and understand practices and patterns of how developing agricultural entrepreneurs run their business in the Mopani District Municipality of Limpopo Province.

The study would hopefully generate innovative ideas and activities, distinct approaches to entrepreneurship based on successful practice and will inform sustainable small business development and how others can develop and succeed. The study further generates and expands academic knowledge and understanding in the nature of and success of small enterprises in rural and disadvantaged communities. Hopefully, small enterprise managers may use the study to reflect on their practices, review or assess what works for them or does not and thus develop a panacea to improve their business effectiveness.

THE SIGNIFICANCE OF THE PERIOD 2003-2008

The period of study, which is between 2003 and 2008 is important in the sense that the first 8 years from 1994 (the birth of a new South Africa), government was busy with policy formulation, legislation and strategies on small enterprise development. Such policies, strategies and legislations were effective from 2003, and there was a huge capital investment on the skilling and the development of small enterprises. The area of Mopani was not left out. It was therefore important to look at the period under reviews so that the research is able to unravel the potential success stories, developments and challenges so that this would inform the kind of interventions in the development of small enterprises in the rural areas going forward.

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PROBLEM STATEMENT

Much of a study on entrepreneurship and small enterprise management has largely been on how to start and succeed in a small business. Whilst voluminous literature and extensive research studies have been conducted on the requirements for successful small enterprise, little attention was paid on the practices and procedures for successful small entrepreneurs. There is not enough information from which lessons can be drawn with regard to how successful entrepreneurs make decisions and what influences such decisions. There is few and far between literature on an entrepreneur’s conduct, behaviour and how these factors influence the decision that leads to the success of an individual entrepreneur. Therefore, it is of outmost importance to understand how and what contributes to the development, success and challenges that small enterprise experience.

PURPOSE STATEMENT

The purpose of the study was to identify, understand practices and procedure of how entrepreneurs run their business as leaders of their businesses in the Mopani District Municipality of Limpopo Province. The study presents the business of doing business by Mopani entrepreneurs, their success stories, as well as the specific challenges facing the area as a rural and disadvantaged community of business persons. The study further sought to understand how an entrepreneur arrived at making certain business decisions, understand traits, effects and other characteristics that may have had an influence in the success of an individual entrepreneur.

RESEARCH QUESTIONS

The research was guided by the following three overarching research questions: 8

What factors, both practical and procedural may be relevant to small enterprise success? What effect does business management practice have on the success of small enterprise? How should entrepreneurs manage their business and relations with customers if they are to succeed?

REVIEW OF LITERATURE.

I an attempt to understand the procedure and practices of small enterprises management, the review of literature focused on theories of entrepreneurship (discovery and creation) as a basis for understanding entrepreneurial practice and procedure of doing business, the effects of such practices, challenges and breakthrough moments that informs how other businesses can develop and succeed. But first, understanding of some concepts was necessary.

CONCEPTS AND DEFINITIONS

The concept of entrepreneurship relates to starting a new venture from limited resources. The term entrepreneurship originally derives from the French ‘entreprende’, meaning to undertake (Kuratko and Hodgetss, 2001) or a person who undertakes (Massey, 2005). It refers to capacity and willingness to undertake organization, and management of a productive venture with all attendant risks, while seeking profit as a reward. It is defined as “an activity that involves the discovery and exploitation of opportunities to introduce new goods and to make profit (Shane, 2003, p.6). In an attempt to situate the research within relevant literature and the current knowledge base, concepts of small enterprise, which is statistically defined (Table 1), management and the relationships between them were explored to provide a better understanding and relevancy to research study.

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Table 1: Definitions of small, micro, medium and large enterprises Category

EU

USA

Australia

UK

RSA

Micro

0 to 10

0 to 9

0 to 5

0 to 9

0 to 4

Small

11 to 50

10 to 99

6 to 19

10 to 49

5 to 50

Medium

51 to 250

100 to 499

20 to 200

50 to 249

51 to 199

Large

250+

500+

200+

250+

200+

Bolton Committee (1971) Although there is no universally accepted definition of small enterprise, South African small enterprise is defined according to staff headcount and turnover. The country has adopted the Bolton Committee (1971) and the International Labour Organisation (ILO)’s definition which has formulated an economic and statistical definition of a small enterprise wherein under the economic definition, an enterprise was regarded as small if it has a relatively small share of their market place, is tax registered and meets other formal tax registration requirements, it is managed by owner in a personalized way. In this study, small enterprise was regarded, or rather defined as a business which is independently owned and personally managed by its owner and which employs not more than 50 regular employees. Whereas the concept of management was perceived as a rational process of getting things done, with the help of other people, by performing tasks such as planning, organising, leading and controlling, aimed at achieving the goals of a business enterprise, management was defined as “a practice of utilizing all available resources to obtain a desired result” (Gupta, McMillan, & Surie, 2004, p. 241).

THEORETICAL BASIS

Entrepreneurship research focused on two basic dimensions: individual (trait) approach and firm (behavioural) approach, mainly concluding on the outcome as a new value creation that fuels economic growth. For many years academic debate have performed in the origins of 10

entrepreneurship and the skills required to run business. Although many studies tried to identify an entrepreneurial personality as a specific set of traits that distinguished entrepreneurs from general population, there has been a substantial amount of disagreement concerning the concept of the entrepreneurial personality. Whereas scholars such as Drucker (1985) assert that individuals can be taught to be entrepreneurs, others consider this as impossible. However, Zahra and Dess (2001) are to the contrary. While he [Drucker] is probably right that the nuts and bolts of entrepreneurship can be studied and learned, the soul of an entrepreneur is something else altogether Zahra and Dess (2001). Zahra and Dess (2001) further indicate that entrepreneur can be a professional manager, but not every manager can be an entrepreneur. Whether entrepreneurial tendencies exits at birth or are developed as a person matures, certain traits (which are not necessarily a product of classrooom learning) are usually evident in those who enjoy success. From the above theoretical framework on entrepreneurship, what remains of interest is an understanding of practices and procedure of how successful entrepreneurs run their business as leaders of their businesses in an environment with high mortality rates of such enterprises. THEORIES OF ENTREPRENURSHIP Two particular theories, which are the discovery and creation theories, have come to dominate the scope of entrepreneurship and discussions on small enterprise activities. The two theories have adopted different theoretical assumptions, most of which concern three central features of entrepreneurial phenomenon: the nature of entrepreneurial opportunities, the nature of individuals as entrepreneurs and the nature of decision making context within which entrepreneurs operate. The two theories are complementary, constitute the logically consistent assumptions about entrepreneurship and provide sets of assumptions which can be applied to a widely studied entrepreneurial and small enterprise management phenomenon. Bull and Willard (1993) suggest that a successful small enterprise is a product of not either the creation or discovery theory, but the application of both such theories of entrepreneurship.

The Discovery theory/ Individual/ Opportunity nexus view

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The theoretical view in the discovery theory, which is often called the Individual / Opportunity (IO) nexus, provides three theoretical assumptions of entrepreneurship, that opportunities are objective, individuals are unique and that entrepreneurs are risk bearing.

The first assumption of discovery theory is that opportunities are objective. The discovery theory assumes that opportunities have an objective component and that these opportunities exist whether or not an individual recognises them (Shane, 2003). These opportunities are derived from the attributes of the market within which an entrepreneur is contemplating action. Thus, if an entrepreneur understands the attributes or structure of a market, he or she will be able to exploit economies of scale in order to seize the opportunities. The individual opportunity nexus theory contends that understanding entrepreneurial opportunities is important because the characteristic of an opportunity influence the very value that opportunity might create.

The second assumption of the discovery theory assumes that entrepreneurship requires differences in people and these differences manifest themselves in the ability to recognise opportunities - that individuals are entrepreneurial alert to existing opportunities (Kirzner, 1973). Entrepreneurial alertness is an attitude (emotional state with a pre-disposition for action) of receptiveness to available opportunities which may be currently overlooked by others in the market. Entrepreneurial alertness is not a deliberate search, but a constant scanning of an environment by an entrepreneur who notices market imperfections. From Kirzner (1973), this assumption recognises that the entrepreneurial nature of human action refers to more than just the action taken, but additionally refers to the human agent that is at all times spontaneously on the lookout for unnoticed market imperfections that might inspire new activity. The recognition of these market imperfections is accompanied by a sense of ‘surprise’, that the imperfection had not previously been recognized, such that it would make an eager entrepreneur to act economically on the opportunities to earn profit derived out of the value of an established business.

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The third assumption of discovery theory is that entrepreneurs are risk bearing. Risk bearing is a necessary part of the individual entrepreneurial process (Shane, 2003). Starting a business ventures is in itself a risk because the outcome is not known but hoped. The decision making context within which entrepreneurs choose to exploit an opportunity is assumed, by discovery theory, to be risky, rather than uncertain. A decision making context is risky if, at the time a decision is being made, decision makers can collect enough information about a decision to anticipate possible outcomes associated with that decision, and the probability of each of those possible outcomes. A decision making context is uncertain if, at the time a decision is being made, decision makers cannot collect the information needed to anticipate either the possible outcomes associated with a decision nor the probability of those outcomes. The decision making context in discovery theory is risky because it assumes that opportunities are objective in nature. As objective phenomena, entrepreneurs can use a variety of data collection and analysis understand the possible outcomes associated with an opportunity, along with the probability of those outcomes.

It may take some time and effort to complete these analyses, but, in principle, they can be done when an opportunity is objective in nature. Accordingly, an entrepreneur pursues business opportunities with knowledge that it can either succeed or fails-such a decision an entrepreneur takes in a discovery theory.

Analyses of the first two assumptions also support the idea that the individual opportunity nexus assumes conditions of risk. The notion that opportunities are objective by definition assumes risk. While it is not known with certainty at the time an opportunity is discovered, whether or not an enterprise will be successful (as it is dependent on the nature of discoverer and the resources he/she has), what remains central to the discovery theory is the individual discoverer of opportunities pursue an opportunity which has a risk and uncertainty in it.

The Creation theory

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Similar to the Individual or Opportunity nexus views, there are three major theoretical assumptions in the creation theory. First, those opportunities are subjective, secondly, that individuals are ordinary and thirdly, that entrepreneurs are uncertainty-bearing. Creation explains the actions that entrepreneurs take to form and exploit opportunities. In this theory, entrepreneurs do not search. They act, and observe how consumers and markets respond to their actions. Opportunities are created, endogenously, by the actions, reactions, and enactment of entrepreneurs exploring ways to produce new products or services. (Venkataraman, 2003, Loasby, 2002 and Cason, 1982).

The assumptions underlying discovery and creation theory are both internally consistent. However, debates about which of these sets of assumptions, per se, most accurately represents reality are not likely to be resolvable. In principle, it will always be possible to interpret the formation of a particular opportunity as either a discovery or creation process. Rather, these sets of assumptions only have empirical implications when they are linked with specific entrepreneurial actions such as leadership or management, decision making, human resources strategy and practice, financial management, marketing and sustaining competitive advantage. In this sense, the actions that entrepreneurs actually take can be thought of as a manifestation of the assumptions they make about the nature of the context within which they are operating, whether discovery context or a creation context. Understanding the implications of these theories and their set assumptions lies in their effective entrepreneurial actions cited above as important considerations for all types of entrepreneurs seeking to form and exploit opportunities, whether operating in a discovery or creation context.

APPROACHES TO ENTREPRENEURSHIP

Within the entrepreneurship theories lies perspectives or approaches such as the trait and behavioural perspectives, which have a bearing on small enterprise development. Whilst the traits theorists focuses on the characteristics of entrepreneurs and personality traits that distinguishes successful entrepreneurs from the unsuccessful ones, behavioural approach focused on the entrepreneur’s function in a newly created organisation, or simply put-will and action. It is 14

assumed developing and successful businesses do not need one approach, but both. A synthesis of these broad approaches suggest entrepreneurship as a process of intentional acts of new value creation in which opportunities are created and realised through various modes of organising (Fig 2)

Fig.2. Approaches to Entrepreneurship

Intention

Opportunity Creation & realisation through

New Value Creation

organising

(Starting condition)

(Process)

(Functional endpoint)

The Individual (Trait) approach

The trait approach sees an individual entrepreneur as the key unit of analysis to explain entrepreneurship phenomenon. The trait approach proposition is that an entrepreneur will probably have strong internal belief in his or her capabilities to commence and complete things and events through his or her own actions. This suggests that successful entrepreneur is distinguished by a projection of his or her internal stock of productive skills and technical knowledge embodied in labour. Therefore, individual traits and attributes predispose entrepreneurs to have within themselves some special enterprising or entrepreneurial fashion and characteristics.

Behavioural (Organisational) approach

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The focus of behavioural approach is in the organisation being created (motives and incentives to take actions), not who is the entrepreneur. The behavioural view stresses the contextual nature of the creating process and the outcome of a complex processes with any influences. In behavioural approach, the role of an individual boils down to a series of actions or behaviour undertaken to enable the creation of an organisation and business development. Personal characteristics are considered secondary and ancillary to the behaviour. Focusing on an enterprise as the unit of analysis, the underlying idea in behaviour approach is the organisation that stimulates entrepreneurship.

KEY INGREDIENTS FOR SUCESSFUL SMALL ENTERPRISES

Effective management is essential if small businesses are to prosper and succeed. Successful entrepreneurs have particular skills, expertise and aptitude that are applied profitably in an enterprise. According to Beaver and Jennings, (1995), the development of a successful small business has to be planned and managed from the top against a seemingly endless array of internal and external constrains. An entrepreneur who wants to succeed would also have to study the success of others, identify business role models network with other business professionals and should have characteristics such as commitment, determination, leadership, opportunity orientation, tolerance of risk, ambiguity, creativity, self-confidence and adaptability, motivation to excel and develop (Kroon, 1998) and many other functions, both intrinsic and acquired. Commitment and determination are seen as more important factors as these enable entrepreneurs to overcome incredible obstacles and also compensate enormously for other weaknesses.

CONSTRAINTS TO SMALL ENTEPRISE DEVELOPMENT.

Business constraints, challenges and failure have been defined in many ways. Business failure is defined “as the loss of capital in an enterprise, a loss to investors” Cochran (1998). These are enterprises that are failing to make satisfactory return on investment. Internationally, small enterprises are responsible for economic development and in employing 65% of workforce. Despite their major role in economic development, small enterprises encounter numerous constraints

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and challenges. The following are mostly perceived reasons for small business failure: poor

management, poor record keeping, poor money management, poor human and customer management, too little to market the business, poor planning, poor pricing practices and the business’s inability to adapt to the changing demands of a business (Van Aardt, Van Aardt and Buzuidenhoud, 2002)

METHODOLOGICAL BACKGROUND

The study employed the qualitative or naturalistic research paradigm. According to Straus and Corbin (1998), qualitative research is a research about persons’ live experiences, behaviours, emotions, feelings as well as organizational functions. The qualitative research approach understands and interprets situations in terms of their actors (focuses on meaning in context and is sensitive to underlying meanings) and consequently may be described as interpretive and subjective. A multiple case study method was undertaken to pursue this research in the Mopani District Municipality of Limpopo Province. In-depth, open ended interviews, observations and secondary sources were used to collect data from 30 agricultural small enterprises The goal was to discover patterns which emerged after interviews, close observation, careful documentation, interpretations and thoughtful analysis of the research through contextual findings.

CASE STUDY RESEARCH

A selected number of cases were examined in their situated contextual complexities. According to Sayer (1992), an intensive qualitative case research strategy has shown to be useful to understanding change processes and the role of individual actors in the process. Case study has been a useful method for gathering and disseminating information on practical issues of concern in small enterprises. A Case study was well suited to understanding entrepreneurs in a real life context when

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seeking to answer the ‘how’ and ‘why’ questions (Yin, 2003). The choice of case study was

influenced by the underlying assumptions on grounded theory, critical realism and the need to understand the practices and procedure of conducting business.

SAMPLING STREATEGY

Data was purposefully collected from municipal database of active small enterprises which had received financial assistance from the municipality. Purposeful sampling was based on the assumption that the researcher wanted to discover, understand and gain insight from those who received funding and hence a selection of a sample from which most could be learnt. These enterprises were interviewed; their activities were observed, and some of their documents were viewed and read.

DATA COLLECTION METHODS

The research problem and purpose warranted three broad sources to gather evidence in order to satisfy the purpose of the study, leads to understanding the case and answers the research questions posed. The methods of collecting data were interviews, observations and documents such as municipal documents outlining support programmes to small enterprises, business income statements and receipts of payment. Thus a multiple sources of data were considered (Leedy and Ormrod, 2001; Tellis, 1997). Thus, by using a combination of observations, interviews and documents as triangulating sources of information, the researcher was able to enhance validity through cross-check findings.

DATA ANALYSIS

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Qualitative data analysis, which is a process of making sense out of data (Merriam, 1998) was used to transform qualitative data into meaningful accounts, interpret and draw conclusions from the mass of collected data so that data could make sense. Data collected was organised and classified into categories or themes, categories inductively derived from data and was coded to identify emerging critical themes emerging from raw data, broad patterns, linkages and relationships that characterise the case more broadly than a single piece of information.

VALIDITY / TRUSTWORTHINESS.

Validity was critical in evaluating findings to whether the results of the research were consistent with the purpose of the study. For the purpose to establish a credible study, the used multiple data collection method and multiple data sources was used to triangulate and mirror reality and confirm emerging findings. According to Denzin, (1970), Jack and Raturi (2006), triangulation combines several research methodologies to study the same phenomenon in order for the methods to complement each other, to cover for the weaknesses inherent in one approach and to confirm the validity of the processes.

DATA PRESENTATION

A thick, rich description was presented to convey findings. Data was presented in categories, themes, explanations, commentaries and in a sufficient descriptive narrative form, under differing subject headings. Data was presented narratively in order to best relate the particulars of the story. According to Merriam (2002, p.5) “the quotes and experts contributed to the thick descriptive nature of qualitative research”. Data was presented in such a way that a lot regarding small business management practices was learnt from the research findings.

FINDINGS : WHAT THE RESEARCH REVEALED

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The findings of the respondents are in relation to experience with regards to understanding practices and procedure of how successful entrepreneurs run their business. Data was gathered from a population of small entrepreneurs of which owners or managers had received assistance in their business. Their demographic factors provide some information about business persons involved.

Table 2. Respondents Characteristics Entrepreneurs Respondents Gender Entrepreneur Age

Highest formal education Previous business experience Entry mode

Farm Age

Ownership

Total number of respondents Male Female 35 or less 36 – 45 years 46 – 55 years 56 years or older School certificate or less Technical or trade certificate Graduate or postgraduate degree Yes No Own start up Inherited Funded 5 years or younger 6 to 10 years 11 to 15 years Sole ownership / sole trader Family owned Partnership/shareholder

30 23 7 1 4 17 8 21 1 8 14 16 12 3 15 27 3 0 25 3 2

Percentage (%) 100 77 23 3 13 57 27 70 3 27 47 53 40 10 50 90 10 0 83 10 7

PERCEPTIONS OF SMALL ENTERPRISE SUCESS

There were various perceptions about how entrepreneurs considered themselves to have been developing and moving towards successful business (Figure 3). A set of indicators were used to determine the identified successful enterprises. By examining their answers, it was then possible

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to determine whether or not they were sustaining themselves. The findings provided fascinating insight into the experiences of owning and managing small enterprises.

Figure3. Entrepreneur perception of their businesses (expressed in percentages %)

my business has been profitable in the last financial year

my business has grown over the last four years

I have had huge profit margings over the last four years

my business has employed more people now than three years ago 84

86

88

90

92

94

96

98

100

STARTING THE ENTERPRISE

Some of these entrepreneurs started as subsistence farmers, and had financed themselves from their own personal savings before funding from municipality was given to them as a grant in 2003. Few others started as small scale vegetable farmers or as family gardens and were aiming to feed their families. They began to increase their farming practices when they had learned enough about the business of farming and that the demands for their crops were growing. Asked how it all started, various entrepreneurs responded as follows:

When I was laid off in 1998 at ZZ2 where I was a foreman for 30 years, I had nothing except the farming knowledge I have gathered during my time of service on the tomato farm. I never worked somewhere except on the farm. The only thing I knew was a tomato. I had no option 21

except start something out of which I could feed my family. You do not need a business plan when you are desperate to find something for survival. These things would come later when you are already in action. What do you do when you live by the river and you have no work to do? The little you plant and sell is enough (Samuel Mangena).

For some, the size of their farming space was determined by the amount of water available to water their garden. With some financial help from the municipalities, they managed to increase their farming space. On average, each of the entrepreneurs had between 10 and 30 employees. Although the majority of those interviewed had neither secondary education nor any formal agricultural knowledge, they showed to have experiential knowledge about what they produced.

There were few others who had started the crop production business because they were previously on the other businesses before their new ventures.

It is often difficult to start another business and succeed when your first one had failed. It was a difficult start for me but had to move on. When finances were made available, I then thought of what everyone needs-vegetables”, said Mabunda who once owned a driving school.

Desire, self-conviction and drive have been the driving factors that made these farmers pursue farming. Generally, entrepreneurs started their businesses to ease the burden within their families or augment the little that they had to depend on. This is contrary to what Mckillup (1998) advocates, that before one starts any business, he or she must conduct needs analysis to establish if there is a need for such a business.

MARKETING AND SALES

Entrepreneurs considered marketing as the basic objective of their business survival, profitability and growth, a prerequisite for income generation, a pivot of sustainable business development and a nerve center of successful small enterprise. Because of their fame and having established themselves in their business, some of these entrepreneurs feature in the local Community Radio 22

Station (Sekgosese FM) programs wherein they marketed their business and also shared their experiences relating to their business. Each entrepreneur had targeted a particular niche market and had his or her regular customer base that they served. Because these entrepreneurs were producing various crops right through the year, they were able to establish an ongoing relationship with local customers, distributed and kept most of their customers. Their businesses were mainly focused on serving their communities and the surrounding areas and less to national market due to competition with big business. However, some had begun to market themselves even beyond their municipal borders. Entrepreneurs sold their produce at a more reasonable and affordable market price for the consumer. Entrepreneurs had also indicated that prices depended mostly on season. One respondent said the following:

The price of tomato is higher in winter as it is cold. The produce lasts longer than in summer. The price of tomatoes is lower in summer as they ripen quickly due to heat factor.

Entrepreneurs prefer to let their produce go quickly as heat may damage their produce as they have no coolers. They would sell second graded products locally and at a cheaper price even though such produce were perhaps damaged as a result of rain. In this way, they would have less to lose and nothing to through away.

Many entrepreneurs had a close contact with customers and could call them and were willing to deliver their produce. Most of these entrepreneurs had established close relationships with customers and well-known brands in their areas. Some were marketed in the municipal newsletters as a way of showing the fruits of municipal initiatives on the promotion of successful small enterprises initiatives. Although this may hold true to Maliwichi (1996)’s assertion that entrepreneurs trained marketing have a chance of an increased sales and profit, and that those that did not receive such training are likely to remain either stable or decline, the respondents entrepreneurs did not seem to have a rigor of marketing except that they seemed to know few hawkers, supermarkets and ordinary people that they could introduce their produce to them. 23

CUSTOMER AND EMPLOYEE RELATIONSHIP MANAGEMENT

The most important key to successful small enterprises is a superior customer service, care and continuous employer-employee relationship, a deep belief in the dignity, worth and potential of every person in a business (Acs & Audretsch, 2005). Some entrepreneurs indicated that they have good relationship with their customers (Fig 4). One entrepreneur explained:

Customers are bosses and should be taken care of. Women are productive, easy to manage, mentor and make better farmers. One needs to recognize their strengths and talents and use them in a maximizing manner so that they will rise to the occasion and push production higher.

Few people employed were permanent and many were seasonal or casual workers. Although the management style of business owners differed from person to person, there was a clear line between employer and employee. However, most entrepreneurs observed showed to have good relations with their employees. According to some business owners, this made some employees feel most valued. One entrepreneur said the following:

I believe in my employees and they believe in me. They know that their performance means advancement in their payments.

Of all the factors affecting production, relational approach in interactions with employees and clients, labor relations and people management is one important factor that brings about successful small enterprise (Davis, 1973). This was alluded to by many entrepreneurs who strongly believed that without good relationships with customers and employees, they would not have achieved what many entrepreneurs failed to achieve.

Fig 4.Perceptions of customer and employee relationship

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120 100 80 60 40 20 0 my service matches customer needs

I always fulfilcustomer orders

I act professionally with employees

I keep customers informed

As for regular customers, entrepreneurs often sell their produce and collect money a week thereafter. Regular customers who buy from them were also given a crate or more for free, depending on how much they buy. This, according to entrepreneurs, makes customers remember a good gesture and then foster relations to such an extent that they would prefer such entrepreneurs over everyone else. The entrepreneurs’ customer relationship style is confirmed by Davis (1973) whose emphasis is on attracting and winning new clients, nurture and retaining those the business has already, entice former clients back into the fold. With regards to employees, entrepreneurs indicated that their achievement is a result of working together with customers and that they try by all means to take care of employees and regularly communicate every other important issue that affects them. Financial and Management accounting

MANAGEMENT OF FINANCE

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Most entrepreneurs interviewed had indicated that they had an opportunity to be skilled through training on financial management. Such training was mostly conducted by the Limpopo Small Business Development Agency and the Centre for Excellence in Agriculture for Emerging Farmers (CEAEF). Although such training was conducted to most of these farmers, they continued with their old ways of recording their finances. They used note books within which they would write some notes on sales. Although no consolidated and comprehensive financial statement was provided by any farmer, entrepreneurs produced receipt issued to customers who bought goods and bank statements of money deposited into their bank accounts. As for one entrepreneurs:

Documenting business transactions provides me with an idea of where my business is going, whether I am making profit of not. I record information of my business sales in my note book because I understand it much better

The main records they kept were handwritten notes of debtors. Some have also indicated on their little notes their income or sales and total costs incurred for the month, something which had enabled them to see what profit and expenditure they made. Although some have been trained on book keeping, which had become an important tool to understand the financial effects of some decisions and activities they engage in, these people rarely showed an application of knowledge acquired, but rather preferred their own methods of financial and management accounting. Perhaps this says a lot about the training received.

SUCCESS FACTORS

Entrepreneurs considered various factors as indicators of success in their businesses. Most businesses have experienced growth in the last four to five years. With some of their profit, entrepreneurs increased the number of employees and bought the necessary tools for their business. This was indicated as follows: 26

I started my business with 7 employees and now I have 18 permanent ones and 10 casual workers. I bought a van and a water pump machine at a government auction. My son is now at a university student, doing Agricultural course.

Others have indicated that their kids have decent school uniform. Most attribute success to experience gained over time, commitment to the business, a high level of motivation that borders on obsession, endurance and assistance from others. To many, the most success factor was in winning community’s unwavering support, establishing good relations with customers, regular base that sustained sustainable business. One farmer summed it up by stating the following: Customers feel emotionally drawn to my business’s innate sense of integrity and my way of doing business. My positive association with clients has been a key to successful business. Above all, I never underrated the people with whom I live and work with. I am what I am because of them. I can now feed my family like any other government employee. I have some savings at the bank.

CHALLENGES

As most businesses do have their fair share of challenges, entrepreneurs interviewed were no exception. Most entrepreneurs’ biggest challenge in the water stressed region was the climatic conditions as well as scarcity of water.

Water had remained a problem on my farm and that is why I cannot form the entire land

Entrepreneurs were continuously looking for additional borehole to supplement the already strained wells of water. Most areas were prone to heat which resulted in high humidity and too

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much evaporation when entrepreneurs water their crops during the day. Most of the farmers relied on water from the permanent rivers such as the Groot Letaba River.

For some, their water pumping machines are forever broken and required regular fixing. To some, diesel had become expensive, their pipes burst due to high temperature. Those without electricity connections relied on generator to pump water. Although power lines run a few meters from the farms, some business persons reported that Eskom (electricity power supply) claim it couls put up a transformer for only few farmers, and that farmers should pop out huge amounts for a transformer installation. One entrepreneur explained:

We are suffering as small farmers. Eskom is refusing to put up a transformer up there because they say there are no many farmers here and that I only plant on a few hectors. They want money that I cannot afford a transformer alone. I would appreciate it if government can help those of us who need electric power so that we can extend our farming business. If government cannot help us in this regard, then they do not want us to continue with the business

Other challenges that entrepreneurs experience include amongst others, lack of business support by big businesses such as Shoprite, stiff competition amongst entrepreneurs and falling prices due to heat and oversupply of similar products. Others have expressed their frustration with regards to market linkages:

It is difficult to get regular customers such as the local Spar and Shoprite. Those that have established this relationship are winners. I also would like to supply one major supermarket one day, said one entrepreneur.

Some entrepreneurs complained that sometimes their produce take time before they were sold and some get obsolete. In such instances, entrepreneurs would reduce the price for their produce. This meant they would not make any profit nor recover their operation cost. Asked what they do in such circumstances, one entrepreneur said:

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I would rather lose a little than my entire produce. If my tomatoes do not sell quickly, I reduce the price or give for free.

Heat, water and the market remained the major threat to business success. Although some of the entrepreneurs were so lucky to secure clients such as Spar and Shoprite, the most complaint still remained that their production does not have a market. Although some entrepreneurs had decided to sell their produce on credit, they were still challenged by those hawkers who do not make payments as per agreements.

MOVING FORWARD

Most entrepreneurs had high hopes for the future of their businesses. Their dreams were to sell their produce nationally, which could open doors for bigger market and internationally. Most entrepreneurs dream was to continue farming and also helping the community through job creation and donating their produce to their local schools and funerals as part of their social responsibility. This in their view would create relationships between their locals and their businesses. Some believed that:

When one gives for free, those that get something for free would always think of you when they want to buy. As Africans with a sense of Ubuntu (humanity), we cannot seat back and say poverty does not concern us as farmers. We need to also open our hearts and provide the little that we can offer.

Besides their plans to solidify relationships with customers, their future plans related to farm expansions, doing additional boreholes or putting enough money to afford power installation and a constant engagement with government on matters pertaining to their businesses.

WORD OF ADVICE

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Most entrepreneurs advised that agriculture is the backbone of sustenance in rural communities and a painful job at the start, but rewarding and requires endurance and resilience before one could eat the fruits of his or her labor. To many, before one venture into a farming business, one should have the love for business. They also advised that one needs patience as it takes time before one could see the fruits of his or her investment. Other farmers advised there is no need to investigate business viability as that does not guarantee success. In their view, they learnt that there is no budget that is satisfactory and can make business success unless one does something to attract customers. As for one other farmer, the advice to potential farmers was:

It is tough out there on the farm, you have to stand your ground, stop complaining as people do not listen much to complaints. A farmer should be in his khaki clothes and between the furrows. There are no short cuts to successful agricultural business. What is required is a hand on approach, dedication and setting realistic business goals.

Others advised that farmers should not lose hope, but should rather ask themselves why others have been in the business for long and never thought of abandoning the business. They further encourage strengthening of an association in which they can discuss issues related to their businesses and also share some vital information (they prefer that farmers should help one another at all times). One advised that profit made from farming should rather be re-invested on the farm than buying the ‘bling bling’ items (cars) that attracts women whose aims is to ‘milk’. This was explained as follows: Don’t chase women when you are doing business. When you are up there, never look down upon others. Fame should not change you, treat everyone with respect (particularly your customers) and never change your personality.

One reminded that employees need to be told that there is no other profit that shall come elsewhere to pay them, but that which shall be derived from their effort in their production effort. They further advised fellow entrepreneurs to stick to the basics, and make sure one understands what makes business work - work hard and pay attention to detail. Perhaps the most important 30

advice was that people should not rush to venture into agricultural business because they would like to make some quick cash, but should rather gradually develop the love for the business which is at times stressful. Betty’s profound words of courage, which were pasted in her study room were perhaps very encouraging:

As a business person, do not expect to get quick reward, be a hard worker, and always be there for your employees and customers. It is when thighs are tough that one should rather gain momentum than giving up.

OBSERVATIONS AND DOCUMENTATIONS

Upon arrival at the farms, the workers were found busy with their daily work. Some were weeding while others are between tomato rows doing some propping. The researcher’s abrupt availability on the farm did distract workers from doing their work. In some farms, there was an aura of joy whilst other wanted to know the purpose of a visit. In most farms that one visited for observation, there was harvesting. There were also some bakkies or vans that had come for what entrepreneurs would sell, ranging from tomatoes, cabbage and onions. Whilst harvesting continued, some would wash/ clean such produce (tomatoes, onions, etc) before they were sorted according to categories. The good ones were put into cases (pack boxes) made of wooden planks with labels. “This is grade one tomatoes and are sent to the market”, one woman said upon enquiry.

The only available documentations that the researcher could lay hands on were amongst others the invoices which provided details of the purchase and payments made by clients. These documents were kept by entrepreneurs in no particular order(Fig 5).

Fig 5. Atchar sales at Ditubatse

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CHARACTERISTICS OF THE CASES STUDIED

The study revealed that the entrepreneurial practices and procedures of running small agricultural enterprises were multidimensional and diverse. There was more to be successful business than the actual way of doing business. The study revealed that business was not done according to ‘conventional wisdom’, but that the practice of business was in accordance with how entrepreneurs deemed it fit. Therefore there was something unique to successful entrepreneurs in 32

Mopani, which makes them remain successful. The uniqueness of their business was that besides all the circumstances around their businesses, they did not allow themselves to be guided by what they may have been taught but that social entrepreneurial ‘spirit’ dictated how they should conduct their business. Small entrepreneurs did not do business according to the book and yet they remained successful. The report further revealed the following findings – that the business performance depended on the management style, that entrepreneur behaviour and practices played an important role in successful business, that education level and training received was not a guarantee for successful small enterprise. The findings of this research serve as a guideline for entrepreneurs to succeed in their attempts to sustainable small enterprise. Business management and marketing skills remained the main constraint. The study further revealed various strategies employed by entrepreneurs to overcome some challenges, which includes the creation of marketing cooperative, regular financial management training, fair pricing, discounts and special offers, superior customer service and continuously improving quality of service delivery. The research concludes that business success is a consequence of embracing a mix of strategies, which may be both formal and informal.

Given the challenges that agricultural small enterprises experienced, government and policy makers need to consider poverty reduction strategies that would ensure sustainable agricultural small enterprises. The policy implications for the study were that as much as governments follow normal public development management theory, it should note that this does not always work. If it does, why would we continue to have the mortality of small enterprises in an area of need? It is not that finance and training would ensure sustainable small enterprise, but that government need to allow people to fail before they could provide support. In that way, entrepreneurs would tell what works and what does not.

ANALYSIS OF FINDINGS The results of this study suggest that a careful analysis of which types of services are currently being provided and why, would be a good start to an effort to design alternative strategies

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support. That said, the extent to which small enterprise development is necessary requires further exploration as business success in rural areas remain farfetched

The findings in this study revealed that the uniqueness of doing business by these entrepreneurs indicated that there is more to successful business than the actual way of doing business as prescribed by literature and preferred by many scholars. SME manager approach to managing business was a result of a wider socio-economic context. Although managerial weakness could be

corrected and supplemented, nothing could make up for the lack of will to achieve success. The analyses of these findings have implications for policy makers and those who work with ownermanagers of small enterprise on how effective and efficient ways to manage and sustain small enterprises can be found. Despite the importance of both internal and external factors, the study found that internal factors were more dominant than the external ones in contributing to the business success or failure in small enterprises. All the internal factors extracted by factor analysis narrowed down to the important role of the business owner and less of government providing assistance and favorable conditions conducive to small entrepreneurship success in these rural areas.

Although continuing education has an effect on sustainable business practices, the education level has not been a critical factor and an effect of the farmer’s ability to coordinate the operation of various enterprises in order to search for alternatives and avoiding excessive losses. Lack of formal and business education is often quoted as a factor limiting the development of entrepreneurs and contributing to an enterprise failure. The levels of entrepreneurs ranged from those who had never been to school to those with post graduate qualifications. To be precise, only one entrepreneur had a postgraduate qualification. Interestingly, most successful entrepreneurs withered the storm and have become successful in their business without any formal education. Thus, an An individual’s decision to launch a new venture is affected by both the environment and an entrepreneur’s personal characteristics and skills. The two elements determine whether a particular opportunity has potential for growth in the eyes of a potential entrepreneur. 34

Several reasons for starting a business have been cited. Some include, being to be one’s own boss, with more control over one’s own work and life, to obtain alternative routes for advancement from dead end jobs and to obtain additional money. Generally, entrepreneurs go into business out of economic necessity or need to survive, or out of failure to find productive use of their energy and initiatives in other avenues. The researcher clearly indicated that almost all entrepreneurs interviewed cited socio-economic problems such as lack of employment, the need to supplement household income, unemployment, poverty and the need to accumulate wealth as the major reasons for starting the business. In the minds of these entrepreneurs, the economic challenges may have been dealt with, but not entirely. The biggest challenge, which some may have grappled with was that of promoting entrepreneurship as a genuine alternative way to achieve greater financial reward and work satisfaction rather than focusing on selfemployment as a way to escape the negative circumstances of unemployment and poverty. What is important therefore is that business should be established to surpass survival-orientated poverty alleviation enterprises to sustainable business growth and development.

There were many enterprises that did not have documented management practices. Almost all business owners interviewed in this study operated their businesses using informal management practices. It is important to note upfront, that this does not imply a lack of focus on, or attention to management issues. In fact, it signals knowledge on the part of the owner of what works best for them, and an appreciation of how important it is to run their businesses that way. If it works for them like it is, then, it must be continued. Many managers justified their management practices as being appropriate and most congruent with the characteristics of the practices in their small enterprise environment.

The purchase of products or goods in many small enterprises is embedded in social kinship and social capital networks that influences the facets of operations of the business. These forged social bonds between an entrepreneur and clients. The reality is that, although the social 35

environment of small enterprises can either strengthen or undermine the sustainability of small enterprises, these businesses cannot be understood independently of their social environments. Observing the social aspect of entrepreneurship, one could arrive at a situation that says entrepreneurs showed ability to read situations, understand such situations and apply their minds to such situations.

Village entrepreneurship, which takes place in a predominantly poor rural and economic environment, provides a good example of an environment within which business takes place. While these enterprises might appear to be the forerunners of an emerging rural capitalism in a predominantly rural economy, these businesses remain very much embedded in social business relations indigenous to their economic practices. The important point emergent in the entrepreneur customer relationships has to do with social relationships, group identify and status. For example, an entrepreneur is morally obliged to give something to the villager on credit. Some of these investments are often not in anticipation of future profits, but rather are investment in social relationships.

The information provided by entrepreneurs revealed that a particular link between people management (human resources) and successful small enterprise. Most successful entrepreneurs have shown to have a varied amount of social intelligence, which they have used to energize their employees. These business owners have shown some element of social competence and have been able to create positive behaviors and emotions in their employees. This has enabled their employees to be productive. Such is a result of employer’s ability to understand what motivates employees, listen attentively, attune to others moods and think about how other feel, persuade employees by engaging then in discussion with the hope of bringing out cooperation, support for business and the best out of all members. Successful entrepreneurs have shown some exuberant personality traits of independent thinking, confidence creativity, ambition, high propensity for risk and innovative abilities as opposed to 36

some unsuccessful ones who failed to even recognize their own lack of knowledge, experience and skill and disinclination to seek outside expertise. The traits displayed by successful entrepreneurs have enabled owners to identify opportunities in the marketplace and strategies that benefits them in their exploitation of such opportunities.

CONCLUSIONS AND RECOMMENDATIONS

Conclusions

Having presented the key findings from different entrepreneurs, this section presents the conclusions from the research as important lessons from the experiences of entrepreneurs. The most important finding is that small farming enterprises are vital for poverty reduction, profit making helpful in understanding small enterprises and that there are entrepreneurs in Mopani who are successfully running their businesses, building their competencies and contributing to the incomes and wellbeing of themselves, their households and their communities. Their commercially orientated production base has enabled some rural families to find a secure income and satisfying “self-employment”. Increased income at the household level has enabled families to build better houses, and cloth and educate their children. Their success did not just come on a plate, but was a result of management style. The most important aspect to take note was that farming has again showed a potential for job creation, spurred and stimulated rural development. Attracting more small entrepreneurs to farming is essential for the country’s economic future. The way to do this is to catch entrepreneurs whilst they are still young. However, one of the most challenging problems currently facing Mopani entrepreneurs is how the large number of entrepreneurs could be assisted in establishing viable rural business.

FUTURE OPTIONS FOR DEVELOPING SUCESSFUL SMALL ENTERPRISES IN DISADVANTAGED COMMUNITIES 37

Conventional wisdom indicates that successful entrepreneurs and production is as a result of farmer’s determination, awareness of the available support and information, farmer’s capacity to mobilize investment resources through their own assets and networks. Local policy and programs on entrepreneurship need to be evidence based by developing contemporary lessonlearning systems that integrate the concept of sustainability, social capital and lessons learnt into entrepreneurship and business management programs.

Conclusion

Successful entrepreneurs seem to have developed an enduring belief and culture which pushed them to do well at on their farms, something which can be claimed as mainly responsible for much of their success. These persons have always tried to be diligent in pursuit to surpass their own expectations. Blame may be heaped upon the governments for inadequate funding, on bureaucracies processes and for lack of proper direction. That alone would take entrepreneurs nowhere

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